DEFA14A: Nuveen Preferred & Income Term Fund (JPI) Seeks Shareholder Approval to Eliminate Term, Offer Choice

Nuveen is asking shareholders of the Nuveen Preferred & Income Term Fund (JPI) to approve the elimination of the fund's term date, offering them a choice between maintaining their investment or tendering shares at NAV.

Summary

• Nuveen is seeking shareholder approval to eliminate the August 31, 2024 term of the Nuveen Preferred & Income Term Fund (JPI).
• If approved, a 100% tender offer at NAV will be conducted before the term date, allowing shareholders to tender up to 100% of their shares.
• If assets after the tender offer fall below $70 million, the tender offer will be cancelled, and the fund will liquidate as originally scheduled.
• If the fund continues as a perpetual fund, 50% of net management fees will be waived for the first year.
• If shareholders reject the term elimination, JPI will liquidate as planned.
• Nuveen is covering the proposal and solicitation costs beyond standard trustee election expenses.
• Saba Capital Management, holding a small stake, opposes the proposal, which Nuveen believes is obstructive and harms shareholders by eliminating choice.
• Nuveen highlights that eliminating the term avoids a full portfolio liquidation of $680 million, potentially resulting in a higher NAV for all shareholders.
• The fund has distributed $20.5315 per share since inception, equating to an annualized distribution rate of 7.03% on the original $25 market price.

Sentiment

Score: 7

Explanation: The document presents a proposal that aims to provide shareholders with a choice, which is generally viewed positively. However, the opposition from Saba Capital and the potential for liquidation if assets fall below a certain threshold introduce some uncertainty.

Positives

• Shareholders gain a choice: maintain exposure to JPI or liquidate at NAV.
• Avoiding a full portfolio liquidation of $680 million could result in a higher NAV.
• Shareholders can continue investing in a preferred securities strategy.
• Maintaining investment in JPI could help shareholders avoid potential tax consequences.
• Shareholders can avoid reinvestment risk and costs.
• Shareholders can continue receiving regular monthly distributions.
• If the term elimination is approved and JPI meets its minimum asset threshold, 50% of net management fees will be waived over the first year following the elimination of the fund's term.

Negatives

• If common assets after the tender offer are less than $70 million, the tender offer will be cancelled and JPI will proceed to terminate and return NAV to shareholders as originally scheduled.
• Saba Capital Management opposes the proposal, creating a contested proxy situation.
• Contested proxies limit how shareholders can vote, potentially disenfranchising individual investors who routinely vote orally.
• Voting on Saba's recommended proxy card does not allow a vote on JPI's trustee election.

Risks

• If the term elimination is not approved, the fund will liquidate as originally scheduled.
• There is a risk that the tender offer will be cancelled if the fund's assets fall below $70 million after the tender.
• Saba Capital's opposition could influence shareholder voting and potentially obstruct the proposal.
• The fund's focus on shorter duration, variable rate preferred securities may be subject to interest rate risk.

Future Outlook

If shareholders approve the term elimination, JPI will conduct a 100% tender offer at NAV. If the fund meets the minimum asset threshold after the tender offer, it will continue as a perpetual fund with a 50% waiver of net management fees for the first year.

Management Comments

• Nuveen believes the proposal provides shareholders a choice and allows them to decide which outcome best fits their needs.
• Nuveen believes Saba's recommendation denies JPI shareholders a choice and seems purely obstructive in nature.

Industry Context

The document references similar proposals for other Nuveen term funds (JLS, JMT, and JPT) where shareholders overwhelmingly approved term elimination, suggesting a trend within Nuveen's closed-end fund management strategy.

Comparison to Industry Standards

• The document compares JPI's performance to its benchmark, which is comprised of a 60% weighting in the ICE BofA U.S. All Capital Securities Index and a 40% weighting in the ICE USD Contingent Capital Index.
• The document also compares JPI's premium/discount history to peers, noting that discount levels have remained narrower than peers over the last several years.

Stakeholder Impact

• Shareholders: Impacted by the choice to maintain their investment or tender shares at NAV.
• Fund Managers: Impacted by the potential continuation of the fund as a perpetual fund.
• Saba Capital: Impacted by the potential rejection of their opposition to the proposal.

Next Steps

• Shareholder vote on the proposal to eliminate the fund's term.
• If approved, a 100% tender offer at NAV will be conducted.
• Determination of whether the fund meets the minimum asset threshold of $70 million after the tender offer.
• Potential continuation of the fund as a perpetual fund with a 50% waiver of net management fees for the first year.

Key Dates

Keywords

Nuveen Preferred & Income Term Fund, JPI, term elimination, tender offer, Saba Capital, proxy, liquidation, NAV, preferred securities, closed-end fund